Essay about E. & J. Gallo Winery Case Study

1449 Words Apr 12th, 2012 6 Pages
Case 25: E. & J. Gallo Winery

Introduction The dessert wine industry realized huge success during the great depression years when buying regular wine was a luxury that few could afford. Characterized by its sweet taste, high alcohol content, and cheap price it was until the 80’s an easy to buy alcoholic beverage that gave people with lower income the opportunity to have wine on their table. The 1980’s was a decade of change in people’s lifestyle with an emphasis on healthier habits and thus, consuming healthier products. This change, combined with an increased consciousness about society’s moral obligations had a negative impact on dessert wine, since it was viewed as a cheap wine with higher alcohol content than regular
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Nevertheless, despite the criticism, the company still produces and sells its signature type of dessert wines; Thunderbird and Night Train.

Discussion According to the Wine Institute the dessert wine segment is 8% of the total U.S. wine sales, with Gallo controlling 16.1% of the segment (Wine Institute). The key success factors in the dessert wine segment have been the placement of this product. Supermarkets, corner liquor stores, and warehouse clubs all carry it. These wines were the beginning of Gallo and it was not until the late '70's that Gallo started producing premium wines and wine coolers. At first the premium wines were marketed without Gallo's name on them but as years have passed and Gallo's various premium wines have won major awards, the Gallo name became associated with the premium wines, and not the dessert wines. While there is not a strategic fit per se between the two there is an economy of scale present and both Gallo and the liquor distributors/ retailers benefit by the company offering a wide range of products, which helps with bracket buying, merchandise assistance, and signage. According to Times Magazine, Gallo’s dessert wine accounts only for 3% of its total wine sales ever since the company transitioned to higher quality wine products (Times Magazine). However, dessert wines, despite the criticism they encounter, have a sweet and more palatable taste which allows for an easy entry for “new drinkers” to the wine

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